Rep. Chip Roy (R-Texas) is raising concerns with the way the Paycheck Protection Program (PPP) is administered, and on April 18, he sent a letter to the other members of Congress, suggesting ways to fix the PPP and serve more businesses.
He noted that Texas has received nearly $30 billion of the total $350 billion, and that $30 billion has funded 135,000 loans, but that the program could use some fixes. In the letter, he outlines six problems and suggests a few solutions as well.
The problems include:
1) Difficulty getting loans. Larger companies with big resources were able to move more quickly to get the capital. Corporations had a week of extra time over small businesses and sole proprietors.
2) Unemployment insurance Catch-22. For small business owners, furloughing employees meant those employees earned more thanks to increased unemployment than in their normal job for up to four months. Without the furlough it's questionable whether businesses could survive.
3) Unattainable eight-week timeline. The PPP forgiveness is tied to payroll over eight weeks, and the SBA says that stipulation starts no more than 10 days after the loan is approved. Some businesses are seeing that date predate their loans. Roy asks that restaurants, hotels, and others who are stuck with no or few customers, get to rehire laid-off workers and to try to get forgivable financing. They would do so 1) not knowing if they will get future financing if needed; 2) not knowing when they will be “allowed” to reopen; and 3) recruit workers from a more lucrative unemployment insurance program!.
4) Limited ability to have expensive rent/mortgage forgiven: The PPP requirement that 75 percent of the forgivable loan must be for employee payroll that restaurants in areas with expensive rent that are trying to figure out how to stay afloat (and in the process, make sure real estate markets don’t collapse) are put in an untenable position. If their rent is more than 25 percent of the total, that portion will not be forgiven.
5) Loan repayment timeline. Given the complexity of small businesses getting hammered for trying to get their loans forgiven (per above), the two-year loan repay is another “risk” for them to roll the dice during a tumultuous period.
6) Previous losses from shutdown are ignored and no firm reopen date is known. Many businesses, particularly restaurants, took massive losses at the hands of government calls for “stay in place” measures and limits on the ability to stay open. Restaurants lost mass quantities of food and perishable goods. Without being able to count previous losses toward the “forgivable” loan, it makes it difficult for those businesses to gamble on reopening and having to stock up on more perishable items without risking massive losses. The PPP was designed to focus on keeping people employed. However, for those for whom that was too late or who have much deeper issues, “keeping people employed” requires some adaptability in how, when and where those funds can be used.
Those issues are fixable. Roy suggests changes to the repayment timeline, adjusting unemployment insurance to be capped at no more than 100 percent of the pay the employee lost, to modify the eight-week timeline for start and time to complete. He would allow past expenses to be part of the forgiveness amounts, as well as the 75 percent requirement to half and the other half that would allow coverage for food perishables and high rents as a percentage of business.
